Kids' brands are entering the metaverse through NFT drops and crypto rewards. But connecting with the tween and younger set in virtual worlds present a new host of challenges as the lines between reality and fantasy become even more difficult for children to distinguish. 

MGA Entertainment is one of the latest toy brands to dabble in Web 3.0-style marketing with a digital token the company will issue to its biggest fans, mostly young girls who collect L.O.L. Surprise and Rainbow High dolls. MGA, with more than $2 billion in yearly revenue, first achieved stardom with Bratz dolls.

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The company is launching an “MGA coin,” designed to incentivize kids to interact with the brand online through apps, websites, games and on social channels. Tokens will be awarded to kids who complete tasks in games or “like” a post, and they can be used for discounts and other benefits. 

“The token is just a currency, a way to gamify an interaction between the brand and the consumer,” said Andrew Yang, CEO of Cultos, the rewards token platform that helped MGA build its program.

Brands have to be careful, however, about the potential to mislead children in the metaverse. In January, the Children’s Advertising Review Unit, a branch of the business group BBB National Programs, even updated its guidelines to account for the surge in interest in the metaverse.

Mamie Kresses, VP at the Children’s Advertising Review Unit, said that NFTs and crypto-rewards programs pose new risks in children’s marketing. Parents already deal with kids who have learned to purchase in-game rewards with the click of a button, Kresses said, and those types of impulses are heightened in the metaverse. NFTs, for instance, are collectibles, which add to their allure among children, Kresses said.

“Here you have a digital item that may be rare and therefore may also be expensive,” Kresses said. “And so there are challenges to making clear to children just what they’re being offered, just what it is and what the costs are exactly.”

The Children’s Advertising Review Unit develops self-regulations for companies to adopt. It also has guidelines on kids’ rewards programs, sweepstakes and promotions.

“Virtual products in children’s spaces is nothing new, right, but we’re seeing an explosion in that,” Kresses said. 

Meanwhile, kids’ brands are catching on to the power of the metaverse, which is the virtual world in which tokens and digital products hold value. Last year, Pinkfong, the maker of Baby Shark, made NFT artwork based on the hit song; Hasbro created NFTs of Power Rangers; and Mattel made Barbie and Ken doll metaverse avatars outfitted with Balmain NFT designer clothing. Earlier this month, Genius Brands, which runs The Kartoon Channel, a streaming site, announced the launch of the Kidaverse, with plans for NFTs. On Monday, Gucci announced a plan to design 10 NFTs with toy-maker Superplastic.

The metaverse concepts are coming easy to children, “They’re innately aware of rewards. They’re innately aware of getting points for playing games. They know about collectability,” said Jason Larian, MGA Entertainment’s VP of product development. “And really, what we’re trying to focus on with them, when you get an MGA coin, you can use it for digital and physical things … in our ecosystem.”

Larian said the company is careful in its marketing to children, following the Children’s Online Privacy Protection Act in the U.S. and General Data Protection Regulation in the E.U.

The rewards program is meant to be supervised by the parents, Larian said. MGA plans to create a tool that lets parents award children MGA coins for completing chores and good deeds, Larian said. Of course, the reality of children on social media and in games means they sometimes find their way into places parents don’t fully understand. Larian said that, at least, the MGA ecosystem is a controlled setting.

The MGA coin could also be a tool of sorts to help teach children about finances, he added. “What if there was a way for the kids to be able to make purchasing decisions that the parent approves and is comfortable with, but by doing things that help the brand,” Larian said.

The MGA coin program is a way to get children to interact in the online spaces that the brand is developing and to connect on social media, Larian said. The loyalty program tries to capitalize on all the promises of what the next-generation internet can be. “Whatever you’re doing, as long as you’re interacting with our brand,” Larian said, “whether you’re purchasing our products online or interacting with our social media, spreading our message, being a fan, you’re going to be getting tokens.”

Sprout Social, a social media management platform, found that when it comes to NFTs, kids' brands are part of the growing conversation on Twitter. Twitter has been one of the more active places where metaverse interests are discussed. Sprout Social said that there were 190,000 NFT-related mentions on Twitter since January. As for children’s brands and NFTs, there were 6,572 mentions. That’s a small part of the overall conversation, but brands like Lego, Mattel and Hasbro are being discussed, Sprout Social said.

However, the sentiment around children’s NFT conversations was less positive than the general conversation, Sprout Social found in an analysis for Ad Age. In general, Twitter’s NFT conversation was 84% positive, 11% neutral and 5% negative. Children’s NFT talk on Twitter was 47% positive, 48% neutral and 5% negative, Sprout Social said. Lego led the NFT conversation for children’s brands, with 5,587 mentions since the start of the year.

MGA Entertainment has already jumped into NFTs by giving them out on packs of L.O.L. Surprise cards, which were in stores last year. The cards had codes to redeem the NFTs. The MGA coin could eventually tie to future NFT promotions, as well, Larian said.

Children’s brands see the potential of the metaverse to add a new dimension to playtime. When a child purchases a doll, for instance, in the real world, it could be tied to a digital avatar that could play in the virtual world, Larian said. “That creates a whole other level of experience and life with that product.”

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CORRECTION: A previous version of this story incorrectly reported MGA Entertainment's yearly revenue.

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